Smith Kline & French Laboratories ltd.

Vs Court of Appeals
Gr No. 121267, October 23, 2001
Vertine Paul Beler
Facts:
Smith Kline (Petitioner) is the assignee of Letters Patent No. 12207 covering the pharmaceutical product
Cimetidine, which relates to derivatives of heterocyclicthio or lower alkoxy or amino lower alkyl
thiourea, ureas or guanadines. Said patent was issued by the BPTTT to Graham John Durant, John Collin
Emmett and Robin Genellin on November 29, 1978. On August 1989, Danlex Research Laboratories
(Private Respondents) petitioned before Bureau of Patents, Trademarks and Technology Transfer
(BPTTT) that it may be granted a compulsory license for the use and manufacture of the pharmaceutical
product Cimetidine. Cimetidine is useful as an antihistamine and in the treatment of ulcers. Cimetidine is
originally patented to Smith Kline and French Laboratories in 1978, and the said patent is still in force at
the time of application by Danlex Research. Petitioner opposed the petition for compulsory license,
arguing that the private respondent had no cause of action and failed to allege how it intended to work the
patented product. Petitioner further stated that its manufacture, use and sales of Cimetidine satisfied the
needs of the Philippine market, hence, there was no need to grant a compulsory license to private
respondent to manufacture, use and sell the same. Finally, petitioner also claimed that the grant of a
compulsory license to private respondent would not promote public safety and that the latter was only
motivated by pecuniary gain
The BPTTT granted the application of Danlex Research together with a provision that Danlex Research
should be paying 2.5% of the net wholesale price as royalty payment to Smith Kline. This was affirmed
by the Court of Appeals. Smith Kline assailed the grant as it argued, among others, that the same is an
invalid exercise of police power because there is no overwhelming public necessity for such grant
considering that Smith Kline is able to provide an adequate supply of it to satisfy the needs of the
Philippine market; that a provision in the Philippine Patent Laws is violative of the Paris Convention to
which the Philippines is a signatory. To explain the second contention, Smith Kline states that the Paris
Convention only allows compulsory licensing if the original licensee (patent holder) has failed to work on
the patent; that therefore, the provision in the Philippine Patent Laws which adds other grounds for the
granting of compulsory license i.e. monopoly, is invalid and contrary to the Paris Convention.
ISSUES: Whether or not the decision of public respondent BPTTT which is an arbitrary exercise of police
power and is violative of international law.
HELD: No. The granting is a valid exercise of police power. Cimetidine is medicinal in nature, and
therefore necessary for the promotion of public health and safety.
The grant of the compulsory license satisfies the requirements of the foregoing provision. More than ten
years have passed since the patent for Cimetidine was issued to petitioner and its predecessors-in-interest,
and the compulsory license applied for by private respondent is for the use, manufacture and sale of a
medicinal product. Furthermore, both the appellate court and the BPTTT found that private respondent
had the capability to work Cimetidine or to make use thereof in the manufacture of a useful product. Also,
Section A(2) of Article 5 [of the Paris Convention] unequivocally and explicitly respects the right of
member countries to adopt legislative measures to provide for the grant of compulsory licenses to prevent
abuses which might result from the exercise of the exclusive rights conferred by the patent. An example
provided of possible abuses is failure to work; however, as such, is merely supplied by way of an
example, it is plain that the treaty does not preclude the inclusion of other forms of categories of abuses.
The legislative intent in the grant of a compulsory license was not only to afford others an opportunity to
provide the public with the quantity of the patented product, but also to prevent the growth of
monopolies. Certainly, the growth of monopolies was among the abuses which Section A, Article 5 of the
Convention foresaw, and which our Congress likewise wished to prevent in enacting.